[Ip-health] The Hindu Business Line: Drug companies' apetite for acquisitions getting refined

[Eleanor Blume]

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http://www.thehindubusinessline.com/2008/07/14/stories/2008071451460300.htm

The Hindu Business Line
*Drug companies' appetite for acquisitions getting refined*
P.T. Jyothi Datta
Mumbai, July 13

Are domestic drug companies seeing a refinement in their appetite for
overseas acquisitions, with big-ticket transactions making way for focused,
"easy-to-digest" deals?

The appetite of drug companies for large acquisitions has not changed, but
with fewer pickings available globally, acquisition targets are getting
sharply defined, observe pharma industry representatives. Consolidation is
here to stay, especially since the valuation of companies is getting
corrected over the last several months, an industry-watcher said.

However, as merger and acquisition strategies of Indian companies gain
sophistication, they are making acquisitions for very specific objectives
like entering a sub-segment, acquiring patents, acquiring a brand or its
distribution, says Mr Kumar Kandaswami, Senior Director with consultant firm
Deloitte Touche Tohmatsu.

Big acquisitions will not go out of fashion, but companies will find
easy-to-digest, focused transactions valuable and may not always look at
acquisitions in a conventional manner of biting big, he points out. Earlier
this month, for instance, Glenmark acquired seven brands in Poland and
Piramal Healthcare acquired global rights on the Haemaccel brand of blood
plasma products from Germany's PlasmaSelect AG.

But Glenmark has never looked at big acquisitions, counters Glenmark's
Managing Director and Chief Executive, Mr Glenn Saldanha. The acquisition of
brands in Poland gives the company a wider scale of operation in Europe,
besides a break into the Polish market touted to be the largest market in
Central and East Europe.

Piramal Healthcare (the erstwhile Nicholas Piramal) too, has a strategy
different from other generic drug makers, points out a pharma company
official. It is focussed on custom manufacturing products for overseas
clients and to grow its strengths in the segment, the company has made well
defined acquisitions, as opposed to big-ticket deals, he said.
'Not new phenomenon'

 Another drug-company representative points out, that in the past too,
companies have sought to buy specific technology, brands or patents that fit
in with their strategy, to get a foot-hold in a particular segment, or to
get proximity to customers in a specific geography.

At present, Ranbaxy is adjusting to its new dispensation, post the buy-out
by Japanese company Daiichi Sankyo; Dr Reddy's is still digesting Germany's
Betapharm deal and Sun Pharma has to sort out its acquisition hitches with
Israel's Taro. But when that process is done, these companies are most
likely to be still on the look-out for good acquisition targets; mid-sized
companies like Lupin are also known to be scouting for an acquisition
opportunity, in Europe. So the appetite has not changed, only there are
fewer targets on offer, the industry-hand said.